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Scranton's financial crisis continues to wander into uncharted territory, as a judge Friday ordered the city to pay its employees their full wages despite administration testimony that the city is nearly broke.

Lackawanna County Judge Michael Barrasse's ruling did not specifically address the city's financial morass or order the city's administration and council to find a solution. Rather, the ruling sided squarely with arguments of the police, fire and Department of Public Works unions that their contracts are legally binding and Mayor Chris Doherty's unilateral slashing of pay to the federal minimum wage of $7.25 an hour is prohibited by state and federal laws.

"The first order of responsibility of civilized government is the protection of its people," Judge Barrasse said in granting a "preliminary permanent injunction" to the unions.

But Mr. Doherty, who did not attend the hearing, said afterward the city simply does not have the money to pay a full payroll of $1 million every two weeks, and an appeal is under consideration. The mayor also said he does not know how the administration, without council cooperation, can obtain financing to fulfill the court order, and he again put the onus on council to fund its 2012 budget.

"I can't print money," Mr. Doherty said. "This is why city council has to fulfill the obligations of their budget."

Council President Janet Evans blamed the mayor for taking unilateral action. Asked where the city goes from here, Mrs. Evans said, "It's quite obvious. He's going to have to comply with the ruling." Asked where the money would come from to pay salaries, Mrs. Evans said, "He (the mayor) will have to prioritize and pay employees rather than lawyers, engineering firms and other vendors."

Friday's ruling was the latest event in an ongoing war between the mayor and council over city finances. The decision appears to have done little to break the stalemate between the mayor and council over revising a recovery plan under state Act 47, under which Scranton has been designated as financially distressed for 20 years.

The mayor says a revised plan with realistic revenues from hefty tax increases is required by wary banks before they again would consider providing financing that the city needs to fill a $16.8 million budget gap this year. He has proposed a 78 percent tax hike over three years and garbage fee hikes. Council has refused to go along with any tax hikes over 10 percent each year and instead wants to fill the gaps with alternative revenue sources, such as increased contributions from nonprofits and commuter, sales and payroll taxes. The mayor says council ideas won't occur quickly and won't produce enough revenue. He notes that council had final say on the budget that relies on borrowing and refinancing that the city has not been able to obtain without a new recovery plan.

Without borrowing and refinancing, the city has devolved into a cash-crunch crisis of running out of money. On June 27, Mr. Doherty announced he would unilaterally slash pay to minimum wages starting with Friday's paychecks. On Monday, the unions sued to prevent the pay cuts, and on Thursday, Judge Barrasse issued a special temporary injunction ordering full wages, pending Friday's hearing.

However, payroll containing the federal minimum wage of $7.25 an hour was transferred Tuesday from the city to a payroll processor, which resulted in Friday's issuance of minimum-wage paychecks Friday to 398 affected employees.

During Friday's hearing, Thomas Jennings, attorney for the unions, contended that the mayor and council are embroiled in a "political squabble" that has now claimed employees as its victims. The unions have binding contracts and the mayor's unilateral pay cuts are contrary to state and federal laws, Mr. Jennings argued. The legal standard at issue is not whether the city is able to pay full wages, but whether it is responsible to do so, and employees have no role in solving that dilemma, he said.

The heads of the fire, police and DPW unions, John Judge, Detective Lt. Bob Martin and Sam Vitris, respectively, testified about their union contracts, and the adverse impacts minimum wages would have on employees.

One member from each union also testified about hardships that minimum wages would bring, including difficulty paying mortgages, car loans, and household and medical expenses, to name a few.

"It would be devastating," testified firefighter Carl Megotz, who is married and has five children. "I don't even know where I'd begin or how I'd make it up. We have no idea (how his family would survive). It's to the point where my wife is losing sleep at night."

City administration solicitor Paul Kelly countered that the city is stuck between a rock and a hard place. If it pays salaries that total $1 million every two weeks, it won't be able to pay mounting unpaid bills, particularly health care insurance, which the city also is contractually obligated to provide. Imposing minimum wages is preferable to allowing health care to lapse, Mr. Kelly argued.

Had the mayor not paid parts of some bills, such as health care, landfill fees, and fuel and parts for the city's fleet of emergency and DPW vehicles, employees would have lost health coverage, trash would have gone uncollected in the streets, and police, fire and DPW workers would not be able to fully function, thus compromising the public's health and safety, Mr. Kelly said. Furthermore, Mr. Kelly claimed the lawsuit should fail because the unions failed to follow the letter of grievance procedures, and the mayor has the power under the Home Rule Charter to cut wages.

Testifying for the administration, city Administrator Ryan McGowan said the city has only $83,000 available as of Friday, after having made a minimum-wage payroll of $311,000.

After two hours of testimony, Judge Barrasse ruled in favor of the unions. The decision makes permanent, at least for the foreseeable future, a special temporary injunction that the judge issued Thursday that was supposed to have barred the administration from imposing pay cuts pending the outcome of Friday's hearing.

Despite Thursday's temporary injunction, the mayor had said Thursday that only minimum wages would be paid Friday, and that prompted the unions to seek to hold him in contempt of Thursday's ruling. However, the judge said he would not hold the mayor in civil contempt Friday because such a move would have been premature.

After Friday's hearing, Mr. Jennings said if paychecks do not contain full wages, he would again file a motion as soon as possible to hold the mayor in contempt of court.

Mr. Kelly, who declined to comment after the hearing, a few hours later told a CNN reporter that he filed a notice of appeal of Judge Barrasse's ruling and that a Chapter 9 bankruptcy is "something we're discussing right now, I'm not at liberty to really discuss that with you on air. It's a viable possibility, though."

However, Mr. Doherty later restated to The Times-Tribune his opposition to seeking bankruptcy, saying, "That's not what we want to do. We need to solve these problems ourselves."

Mrs. Evans refused to rule out the possibility of bankruptcy, saying, "We should do everything possible to avoid it," but also added, "It's a last resort. It remains on the table."

Contact the writer: jlockwood@timesshamrock.com

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